The total excess liquidity in banks, which invested in certificates of deposit with the Central Bank at the end of August last year amounted to 150 billion dirhams compared to 138 billion dirhams at the end of 2018, two banking experts confirmed that banks resort to certificates of deposit issued by the Central Bank,

The total excess liquidity in banks invested in certificates of deposit with the Central Bank at the end of last August amounted to 150 billion dirhams compared to 138 billion dirhams at the end of 2018.

Two banking experts stressed that banks resort to certificates of deposit issued by the Central Bank, being the best and safest of any other investment instruments, pointing out that the certificates of deposit is the appropriate investment vehicle to move liquidity, in light of the hedge of banks risk management towards illicit lending.

Excess liquidity

In detail, the total excess liquidity in banks invested in certificates of deposit with the Central Bank at the end of last August amounted to 150 billion dirhams compared to 138 billion dirhams at the end of 2018, an increase of 12 billion during the first eight months of 2019, equivalent to growth of 8.7 %.

Certificates of deposit are one of the liquidity management tools provided by the Central Bank, which allowed banks to buy and invest in them in return for interest in times of ample liquidity or liquidation when needed.

During August alone, certificates of deposit rose by nearly AED 4 billion, reflecting ample liquidity in the country's banking sector.

Safe tools

The banking expert Ahmed Youssef said that most banks are conservative in borrowing, at a time when there are large amounts of liquidity, in addition to the instability of the global market and the political conditions surrounding the region.

He explained that banks in such cases are looking for safe tools to invest liquidity surpluses, and therefore resort to certificates of deposit issued by the Central Bank, being the best and safest than any other investment instruments.

Hedge banks

For his part, banking expert, Ahmed Ibrahim, said that there is a demand for lending, this is the main activity to employ liquidity in banks, but the commitment to ensure the creditworthiness of the customer through the Union Credit Information Company, reduces the approval of funding applications, and makes banks more cautious In lending, therefore, they are moving towards certificates of deposit, being the appropriate investment vehicle to move liquidity, with banks risk management hedge against ill-considered lending.

Monetary base

Central bank data showed that the monetary base in the country, amounted to 386 billion dirhams at the end of last August, up from 380 billion at the end of last year, an increase of six billion dirhams over a period of eight months.

The figures showed that the Central Bank's foreign assets amounted to AED 373 billion at the end of August compared to AED 362 billion at the end of last year, an increase of AED 11 billion, equivalent to a growth of 3%.